Friday, October 21, 2011

Not Quite a Reliable History of Economics

Odrek Rwabwogo (20 October) writes in The Independent, posted in Africa Confidential, (Kampala) HERE:

“Uganda: Electricity Subsidies Are Good for Economy”

“The 'invisible hand of the 'market is not necessarily holy. History shows us it is tinkered with in order to take a direction a nation wants to go for growth. The 'invisible hand' was an argument David Ricardo and Adam Smith, the two proponents of British economic domination of the world, advanced heavily in support of globalisation to keep England competitive in the 17th and 18th century.’

‘Good’ or ‘bad’ for Uganda, if it relies on this ahistorical assertion then Odek’s Rwabogo’s argument for subsidies is in serious trouble.

First, Adam Smith did not provide an “invisible hand" argument for anything – he used is as single metaphor for the single instance he gave regarding some, by no means all, merchants being “insecure” about sending their capital abroad, and instead they invested it in Britain (Wealth Of Nation, Book IV, chapter 2, paragraphs 1-9).

Second, David Ricardo, like all political economists contemporary with, and immediately after, Adam Smith, did not mention the metaphor of “an invisible hand”.

In fact, until the 1870s, nobody mentioned Smith’s use of the IH metaphor, and those few after 1870 who did were but a handful. The IH metaphor was mentioned in oral lectures at Cambridge and only appeared in print from the 1920s (Pigou). It became ubiquitous in modern economics after Oscar Lange, 1937,1947, and Paul Samuelson from 1948. By the 1950s, and 1960s, the age of British imperialism was over.

Lastly, there never was an “invisible hand” of the market in anything Adam Smith wrote. It was and remains an invented associated by modern neo-classical economists.


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